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The lessons of Canada's manufacturing leaders

Three lessons for Canada's struggling manufacturing sector from nine of its most successful firms.

An employee works on the production line of cast aluminium engines at Honda Motor Co. Ltd.'s plant in Alliston, Ontario. (NORM BETTS / BLOOMBERG NEWS)

By Paul Boothe

Thu., March 20, 2014

There is no question that the picture for Canadian manufacturing has been pretty gloomy over the past decade. Buffeted by a strong dollar, a deep and prolonged recession in the U.S. and the rise of manufacturing in emerging economies, the sector has been declining in both output and employment. But a closer look at the picture reveals some bright spots.

Some Canadian manufacturers have been competing and winning in global markets. What can we learn from these leading firms? Working with industry and government partners, Ivey researchers asked that question of nine Canadian manufacturing leaders. The results are found in our latest study: The Future of Canadian Manufacturing – Learning from Leading Firms.

The nine firms we studied were industry leaders with at least 30 per cent of their sales outside of Canada. They came from the agri-food and auto-parts sectors and a third group of companies chosen for their product and geographical diversity. The structured interviews we conducted with senior executives focused on two questions. First, what was your strategy to become a successful global competitor? Second, looking across the jurisdictions in which you operate, what are the best-in-class public policies that support manufacturing? We found a good deal of commonality in executives’ responses.

Many of the firms we studied used decentralized management structures where individual plant managers had responsibility for revenues as well as costs. Thus, plant managers were constantly on the lookout for opportunities to increase sales and use their resources to maximum efficiency. Without exception, firms focused firmly on the customer, aiming to respond quickly and fully to customers’ changing needs. Quality was also an imperative. Executives argued that to win business they needed best-in-class quality. Driving down production costs followed once quality was achieved and new business was won.

All the firms we studied were constantly innovating – although in different ways. In some cases, they focused on improving both products and the processes used to manufacture them. In other cases, they concentrated efforts on process improvements. Employees from all parts of the organization were expected to contribute to these ongoing efforts.

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Regarding best-practice public policy, executives gave Canada high marks in two areas. Canada was identified as having a best-in-class fiscal regime to support manufacturing. Firms also remarked on the success of immigration in bringing skilled, industrious workers to settle in Canada. Mexico was identified as best in class for its large portfolio of trade agreements and its system for attracting and implementing new investment. Germany was cited for its apprenticeship system and Western Europe for ease of transportation and border crossing.

We convened our project partners, researchers and executives from the leading firms last November to review our findings and to crystallize recommendations for immediate action by firms and governments. The group agreed on three key initiatives.

All agreed that the primary responsibility for revitalizing Canadian manufacturing lies with the private sector. Governments should play a supporting role. The first recommendation for firms seeking to become successful global competitors was to find an experienced mentor to help them expand into international markets. The QG100 business mentorship initiative in Quebec was cited as a successful example. The second recommendation was for firms to form partnerships with local educational institutions, using classroom visits, plant tours and even equipment sharing to attract young people to careers in manufacturing. The final recommendation for immediate action was for governments at all levels to work together better to attract manufacturing investments to Canada. ProMexico was cited as the best-in-class example.

There is no question that Canadian manufacturing has gone through a rough decade, but the leading firms in our study are proof that Canadian manufacturers can compete and win in international markets. Lessons from those leading firms and the recommendations for immediate action point the way forward. Let’s get to work.

Paul Boothe is Professor and Director of the Lawrence National Centre for Policy and Management at Western’s Ivey Business School.

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